Google shares hit all-time high

Search-engine giant Google is flying high Friday, after a strong second-quarter financial performance and hints at a possible dividend or buyback in the future sent shares in the search engine giant soaring.

Today, shares in Google GOOG have reached an all-time high of $668.25, rising more than 15% in trading Friday morning. Analysts and investors were pleased with new CFO Ruth Porat’s assurance that the firm would reign in expenses, and at the tantalizing possibility that the Mountain View company would start giving some of its substantial cash pile back to investors.

Even after shares jumped, analysts like Morningtars’ Rick Summer think the company’s shares are still cheap. “Google posted strong second-quarter results, demonstrating robust demand in its core business and stronger expense discipline,” Summer wrote in an analyst note. “We continue to believe the shares are undervalued, even after the strong move after results were announced. We are sticking with our wide moat rating and $715 fair value estimate at this time. ”

Why GE could retake throne as king of all dividend stocks

For the better part of a century, General Electric was the king of all dividend stocks. It returned money to shareholders every quarter since 1899, and increased its payout for 32 years in a row, making it one of the S&P 500’s “Dividend Aristocrats.”

But it gave up its crown in 2009 when the toll of the financial crisis forced it to cut its dividend by more than two thirds—its only reduction since the Great Depression. Now, after the industrial conglomerate said Friday it would sell off its financial unit GE Capital, it’s poised to retake its position as a dividend growth stock for the ages with a promise to return more than $90 billion to investors by 2018 through share buybacks and dividends.

Following the market crash in 2008, GE began raising its dividend again in 2010. Since then, it has almost doubled its quarterly payout from 12 cents to 23 cents per share. While that amount is still lower than the pre-recession distribution of 31 cents per share, investors expect that the dividend will only accelerate from here—especially after GE rids itself of its financial arm.

“The dividend history of the company is important in judging management’s commitment to paying a dividend and sharing their success with shareholders,” says Jack Leslie, a portfolio manager at Miller/Howard who helps oversee $9 billion, including the Touchstone Premium Yield Equity Fund. “But investors need to be forward-looking and not focused exclusively on what happened in the past.”

Leslie bought GE shares after the company resumed increasing its dividend after the cut – and after appearing to be healthy enough to sustain that growth for a long time to come. Already, the stock has more than doubled in value since he bought it. “You want to make sure that [a company] can pay its creditors, pay its taxes, and have enough left over to pay and increase its dividends,” he says. “You want to see that the business is improving, and has the growth to support the dividend increases. “

Although GE said Friday that it does not plan to raise its dividend until after 2016 (it aims to complete the sale of GE Capital over the next two years), the company is expressing an almost unprecedented amount of shareholder friendliness. The $90 billion it intends to return to investors includes a $50 billion stock buyback that ties Apple AAPLfor the biggest share repurchase ever.

Besides, without its financial businesses, GE will be able to loosen its purse strings and give away a lot more cash. Cutting ties with GE Capital means the parent company can likely free itself of the restrictions government regulators imposed on GE in the wake of the financial crisis—effectively treating it like a bank that is too big to fail. The “systemically important” status (which regulators also slapped on AIG AIG, among others) has required GE to keep more money in its coffers than it otherwise might, and subjected its dividend and buyback plans to government approval.

GE said in its a statement that it is already working with regulators to remove the yoke of GE Capital’s designation as systemically important.

While GE shares GE rose nearly 11% Friday, the stock still has a dividend yield of 3.2%, and some investors see it as a value play, in addition to a sure-fire source of income.

“I just think a lot of investors have written them off and say to themselves, why own something that’s half industrial, half financial, when they can go out and recreate that by buying individual stocks?” says Tom Huber, manager of the $4.8 billion T. Rowe Price Dividend Growth Fund, who just recently bought GE again after avoiding it following the recession. “I guess that’s essentially what the opportunity is: As that business makes changes, the earnings stream is, in my opinion, more dependable and more durable, and there’s room for the valuation to improve.”

Mexican beer growth leads Constellation Brands to pay first dividend

Constellation Brands plans to pay a quarterly dividend for the first time since the alcoholic beverage company went public in 1973, a move to join its peers in the shareholder-friendly payout that took over 40 years to achieve.

The maker of Corona beers and Svedka vodka had long been an anomaly among publicly traded alcoholic beverage companies by declining to pay a dividend. U.S.-based companies like Brown-Forman and Molson Coors TAP, as well as industry giants abroad including Diageo, Pernod Ricard and Anheuser-Busch BUD have long paid dividends to investors.

Constellation’s STZ investors can thank the consistent cash flow that the company says it now generates from beer, wine and spirits. Constellation spent billions to acquire the U.S. assets of Grupo Modelo, a deal that was completed in 2013 and gave the company full control of the U.S. imports of Corona and Modelo Especial. Since then, Constellation has hauled in a lot more revenue and profits from the beer business, which had previously been a joint venture. Constellation is now the third largest producer and marketer of beer in the U.S., though it also sells wines like Robert Mondavi and Kim Crawford and a few, mostly small, spirits brands.

The company intends to pay an initial quarterly cash dividend of 31 cents per Class A share on May 22. Chief Financial Officer Bob Ryder hinted future increases to the dividend could occur based on the company’s growth in net income and free cash flow. Constellation Brands on Thursday also announced net sales leapt 24% for fiscal 2015 to $6 billion, with net income climbing 39%. The Mexican beer business fueled the growth, with wine and spirits sales only increasing 1%.

Bank of America raises its dividend for the first time in 7 years

Bank of America has approved an increase to the bank’s quarterly dividend for the first time in seven years, an increase that comes after the bank had to resubmit its proposed capital actions to the Federal Reserve in May.

On Wednesday, the bank said it would pay shareholders a quarterly dividend of 5 cents a share, up from the prior payout of a penny a share. The dividend is payable Sept. 26 to shareholders of record as of Sept. 5. BofA’s BAC dividend had been stuck at a penny a share since the bank twice slashed the payout during the financial crisis.

The successful move to increase the payout comes after a false start occurred earlier this year. In March, BofA said the Fed signed off on the company’s capital plan, which included an intention to increase the dividend by five cents a share and the authorization of a new $4 billion stock repurchase program. But those plans were suspended after BofA downwardly revised its estimated capital ratios for the first quarter, resulting in the Fed directing the company to resubmit data and suspending its planned capital actions.

BofA updated and resubmitted its requested capital actions late in May and got half of what it originally wanted: the dividend is increasing, but there will be no stock repurchases. BofA said the Fed informed the bank it “did not object to the proposed capital actions.”

BofA’s dividend hike news comes a few weeks after the bank reported better-than-expected second quarter results. CEO Brian Moynihan and other banking executives struck a bullish tone about the state of the U.S. economy as they look ahead to the back half of the year.

BNP Paribas hunkers down, plans dividend cut ahead of U.S. settlement

BNP Paribas BNP, the France-based bank, intends to cut its dividend and sell billions of euros in bonds as it looks to a $9 billion settlement with the U.S. government.

The U.S. investigation targeted the bank for alleged violations of sanctions in its dealings with Iran, and the multibillion charge would be a significant hit to BNP’s capital ratios.

Reports say the bank will plead guilty to criminal charges and pay a $9 billion penalty to state and federal authorities.

The bank doesn’t intend to issue any new shares to build up its capital, instead it will dramatically reduce or eliminate dividend payments to investors, The Wall Street Journal said.

BNP has paid a dividend every year since at least 1998, and last year investors received $2.04 a share. The biggest loser from the dividend cut would be Belgium, which owned 10.3% share of the bank as of Dec. 31 and received about $261 million in dividend payments for 2013.

The settlement is expected to be announced on Monday and both parties are working to iron out the details in the coming days.

On top of that, New York’s financial regulator may suspend the bank’s ability to transact dollar-clearing activities, which will target the bank’s trade-finance unit that is at the heart of the sanctions-violation charges. The suspension, which would be the first of its kind for a global bank, would be phased in over several months.

Best Buy boosts dividend ahead of shareholder meeting

Best Buy BBY, which is facing a number of challenges in the electronics segment this year, on Tuesday gave investors a reason to cheer as the electronics retailer raised its quarterly dividend for the first time in two years.

The company approved a 12% increase to the company’s dividend, increasing the payout to 19 cents a share. The increase, according to President and Chief Executive Hubert Joly, is “indicative of our improved cash position.”

The dividend news was disclosed ahead of Best Buy’s shareholder meeting, which is to be held at the company’s corporate campus in Minnesota later on Tuesday.

Best Buy investors haven’t had a lot to celebrate this year. The company’s shares are down about 27% so far in 2014, missing out on the broader market’s increase. The retailer in May reported a steeper-than-expected drop in fiscal first-quarter sales. At the time, Best Buy indicated it projected industry-wide declines for many electronic categories it competes in during the second and third quarters of this year. Ongoing softness in the mobile category was partly to blame, as consumers await highly anticipated new products.

Best Buy has faced a tough challenge from online retailers like Amazon.com AMZN, which can provide customers greater clarity about where to get the best deals for the latest gadgets. Best Buy has sought to compete by improving the competitiveness of its prices.

The stock has been on a tear since April, when the split, a small dividend increase and a big new share repurchase plan were announced. Apple closed Tuesday at $625.63, its highest price since Oct. 2012.

Whether it’s got ahead of itself is the multi-billion dollar question, and on that opinions are divided.

Half the analysts we track think Apple’s share price still has a ways to go — all the way to $777 a share, according the most bullish among them. Half think it’s overpriced today — either that or they haven’t dusted off their 12-month targets.

“I have not updated my price target,” says Needham’s Charlie Wolf, who’s still at $590 a share and will not be budged. “I suspect the stock is moving up in front of WWDC. If Apple does not introduce new products, the price could fall back to $550-$575. If Apple pulls a surprise, I may have to respond. But I will at least have a reason for doing so.”

Below: The analysts’ published price targets, as current as I could make them. Updates appreciated.

Tom Huber started managing the T. Rowe Price Dividend Growth fund PRDGX right around the time the tech bubble burst in 2000 and has seen plenty of market tumult since then. Through it all, the 45-year-old Wisconsin native has stuck with the slow and steady strategy of betting on companies with strong balance sheets and rising dividends. When stocks were soaring, that might have seemed boring. But with the markets seesawing wildly, its appeal is clear. The $2 billion fund has consistently beaten the market over the past decade, with a 4.1% annualized return, vs. the S&P 500’s (SPX) 3.2%. Huber makes the case for dividend stocks — including struggling bank shares — and discusses what he has been buying. Edited excerpts:

With the current market volatility, dividend-paying stocks look attractive to skittish investors. Is now the time for a dividend strategy?

The idea of getting some level of return, regardless of the direction of the stock price, is at the top of investors’ minds right now because of the environment. There’s a lot of skittishness, as you called it, or nervousness. And with the low level of interest rates, it’s very difficult for investors to find competitive yields without taking undue risks. I think dividend growth is an investable strategy over market cycles, but there are periods when it’s going to do better than the market, and now is probably one of them.

Companies have been stockpiling cash since the financial crisis. What has been the impact on dividends?

We’ve seen a nice recovery since the big recession, when financial services pretty much eliminated their dividends, and other more cyclical companies took a hit as well. The payout ratio for the S&P 500 is now hovering at 30%, which is historically low. The historical rate is closer to 50%. There is capacity for dividend growth.

Financials make up 13% of your portfolio, even in a tough year for them. Why?

Financials are historically very good dividend payers and very good growth stocks. I owned a lot of financials going into the crisis. We took our hits, certainly, but we avoided the biggest disasters. I had minimal Citi C shares, no AIG AIG, and never owned Bear or Lehman. At this point, we’ve consolidated into names like U.S. Bancorp USB, Wells Fargo WFC, and J.P. Morgan Chase jpm. USB and Wells, in particular, are predominantly U.S. banks, and they’re very well-capitalized, well-managed companies. Both have reinitiated dividends. Banks are all suffering right now, but we want to be in those stocks that are going to act rationally in a difficult environment and come out strongly on the other side.

Pfizer is your largest holding, and was the fund’s top performer earlier in the year. But with top-selling Lipitor coming off patent, it doesn’t seem like a growth play. What’s your thinking?

This wasn’t such a growth idea, but one where we thought there was a lot of value, an attractive yield, and a tremendous amount of free cash flow over the next several years. The company went through a management change, and the new management has been a breath of fresh air in terms of allocation of capital to shareholders. We’ve seen a healthy level of buybacks, dividends, and dividend growth. Pfizer pfe is facing big patent issues, but that’s no secret. It has a pipeline with a few new drugs going through the FDA that should help offset some of the loss. I think it’s a safe investment, and one where we see fair value of $24 to $25 [compared with a recent $20]. On top of a 4% yield, that’s a nice return.

What have you been buying recently?

One that’s moved into the top five is PepsiCo pep. We have a valuation bias, so when we notice a company of Pepsi’s quality that seems to be struggling, we’ll do the work. It has underperformed relative to its peers, in part because of losing some market share domestically to Coca-Cola. I think it is now making the right decisions to increase marketing and ad spend. If you look out a few years and assume a reasonable multiple, you can make 15% to 20% without taking on undue risk. Another one in the consumer area is Kohl’s kss, the department store chain. It just this year initiated its first dividend, and the yield is under 2%. It was your classic rapid-growth darling stock that matured. It had grown the store base 15% to 20% a year, year in and year out. Eventually the market can’t support that level of growth. Kohl’s is a very well-managed company and figured it out very quickly. It will now grow square footage only 2% to 3% a year. It won’t be investing in stores that wouldn’t pay off for us as shareholders. For us, in an economy that’s hardly growing, 5% to 6% topline growth is not bad.

You’ve made a big bet on industrials. What do you like there?

United Technologies UTX [which makes everything from air conditioners to elevators to helicopters] is well positioned in the industrial world and is a good way to play global GDP growth. It does about 20% of its business in emerging markets. That’s important now, and it’s only going to become more important. We think it could earn close to $6.80 in 2013. It trades around 11 times that number, and it could get a higher multiple in an environment where people feel better about the global economy.